Budget 2025-26 changed the tax math for most Indians, zero tax up to ₹12 lakh, and the 30% slab pushed all the way to ₹24 lakh. Here is everything you need to know at a glance.
| What | Details |
| Default Regime | New tax regime (since FY 2023-24) – opt out for old |
| Zero Tax Up To | ₹12 lakh (₹12.75 lakh for salaried after standard deduction) |
| Standard Deduction | ₹75,000 (salaried only) |
| Section 87A Rebate | ₹60,000 (not applicable above ₹12 lakh taxable income) |
| Tax Slabs (FY 2025-26 / AY 2026 – 27) | Up to ₹4L: Nil ₹4–8L: 5% ₹8–12L: 10% ₹12–16L: 15% ₹16–20L: 20% ₹20–24L: 25% Above ₹24L: 30% |
| Deductions Available | Standard deduction + Employer NPS (80CCD(2)) only |
| Deductions Removed | 80C, 80D, HRA, LTA, home loan interest |
| When Old Regime Wins | Total deductions exceed ₹5–6 lakh |
| Switching Rules | Salaried can switch every year / Business taxpayers get one switch back |
| Common Mistake | Forgetting employer NPS (80CCD(2)) is still deductible in the new regime |
Above ₹12.75 lakh, run both regimes side by side before deciding, what worked three years ago may cost more today. Most people found out about the new tax regime the wrong way. TDS already deducted, year half over, nobody mentioned a regime change. If that sounds familiar, the here is the guide solving your confusion.
*Source: From the official press release by the Ministry of Finance.
What is the New Tax Regime?
The new tax regime is a trade: Give up most deductions, pay lower income tax slab rates.
Introduced in 2020, overhauled in Budget 2025-26.
The headline change: Income up to Rs. 12 lakh attracts zero tax. Salaried individuals add Rs. 75,000 standard deduction on top, pushing their ceiling to Rs. 12.75 lakh.
Since FY 2023-24, this is the default. You do not opt in rather you opt out.
Why Was the New Tax Regime Introduced?
Old regime in practice: scramble every January to show 80C investments, dig up HRA receipts, locate the home loan certificate. For people who did this consistently, it worked. For everyone else, compliance theatre.
New tax regime was built for the second group. No receipts, no proofs, no investments bought for the wrong reason. Budget 2025 went further and removed the tax burden entirely for most of the salaried middle class.
How Does the New Tax Regime Work?
Step 1: Key Features of the New Tax Regime
FY 2025-26 changes:
- Basic exemption raised to Rs. 4 lakh
- Section 87A rebate: Rs. 60,000
- Zero tax up to Rs. 12 lakh (Rs. 12.75 lakh salaried)
- Employer NPS under 80CCD(2) deductible
- Standard deduction Rs. 75,000 retained
- Default since FY 2023-24
What you lose?
80C, 80D, HRA, LTA, home loan interest. Gone. Old regime exists as opt-in but the gap has narrowed sharply.
Step 2: Tax Slabs Under the New Tax Regime
As per Union Budget 2025, the new regime tax slab for FY 2025-26 (AY 2026-27) looks like this:
| Income Slab | Tax Rate |
| Up to Rs. 4 lakh | Nil |
| Rs. 4 lakh to Rs. 8 lakh | 5% |
| Rs. 8 lakh to Rs. 12 lakh | 10% |
| Rs. 12 lakh to Rs. 16 lakh | 15% |
| Rs. 16 lakh to Rs. 20 lakh | 20% |
| Rs. 20 lakh to Rs. 24 lakh | 25% |
| Above Rs. 24 lakh | 30% |
30% used to start at Rs. 15 lakh but it’s now Rs. 24 lakh. Anyone in that range gets a direct rate cut with zero deduction changes needed. For income under Rs. 12 lakh, the Section 87A rebate absorbs everything.
What Are the Benefits of Choosing the New Tax Regime?
Zero tax under Rs. 12 lakh. That alone covers most of India’s salaried workforce. Above that, someone at Rs. 15 lakh with no home loan pays meaningfully less without gathering a single document.
What Should You Consider When Choosing Between the Old and New Tax Regime?
What decides it: What your deductions are actually worth.
Add up 80C, 80D, HRA, home loan interest, NPS. Above Rs. 5-6 lakh combined, run a comparison. Below that, new regime wins.
Senior citizens with high medical costs may keep 80D. Young professionals renting cheaply rarely benefit from old regime. 80CCD(2) employer NPS stays deductible in the new regime, which most people miss.
How to Calculate Your Tax Liability in the New Tax Regime?
Step 3: Income Tax Calculation Example (New)
Salaried individual, Rs. 15 lakh gross, FY 2025-26:
- Standard deduction: Rs. 75,000
- Taxable income: Rs. 14.25 lakh
- Rs. 0-4L: Nil
- Rs. 4-8L at 5%: Rs. 20,000
- Rs. 8-12L at 10%: Rs. 40,000
- Rs. 12-14.25L at 15%: Rs. 33,750
- Total: Rs. 93,750 + 4% cess = Rs. 97,500
At Rs. 12.75 lakh gross, standard deduction drops taxable income to Rs. 12 lakh exactly. Section 87A covers the full Rs. 60,000 liabilities. Net tax is zero.
87A does not apply above Rs. 12 lakh. Marginal relief handles edge cases so Rs. 12.1 lakh earners are not penalised the same as Rs. 14 lakh earners.
How a Platform Helps You Understand Your Tax Obligations?
Marginal relief, surcharge, cess, regime comparison: too many variables for manual calculation.
Good platforms carry the latest tax slab data post-Budget and show both regimes side by side. Get the answer before TDS is already deducted. Jainam Broking Limited has those conversations at the planning stage. Which deductions justify old regime? Does employer NPS shift the math? April answers, not March.
What Are Common Mistakes to Avoid in the New Tax Regime?
Defaulting without checking under Rs. 12 lakh is automatic but above that, not.
Forgetting 80CCD(2), employer NPS is still deductible, and most employees assume it is gone.
Missing the employer declaration. The old regime requires telling your employer before the year begins. Miss it, and TDS runs at new regime rates regardless.
Ignoring marginal relief. Rs. 12.5 lakh taxable does not mean tax on the full amount. Marginal relief caps the excess to what you earned above the Rs. 12 lakh threshold.
Conclusion
Budget 2025-26 changed the math for most taxpayers. Zero tax under Rs. 12 lakh, 30% pushed to Rs. 24 lakh. Under Rs. 12.75 lakh salaried, decision made. Above that, run both numbers. What worked three years ago may not be right today.
Frequently Asked Questions
What is the main difference between the new tax regime and the old one?
Old regime: more deductions, higher base rates. New regime: almost no deductions, lower rates. Budget 2025-26 pushed zero-tax income to Rs. 12 lakh through an enhanced rebate.
Who should opt for the new tax regime?
Anyone under Rs. 12 lakh taxable income. Salaried under Rs. 12.75 lakh gross. Anyone above those thresholds whose total deductions fall short of Rs. 5-6 lakh.
Are there any deductions available in the new tax regime?
Standard deduction of Rs. 75,000 and employer NPS under 80CCD(2). The big ones, 80C, 80D, HRA, home loan interest, are gone.
How do tax slabs differ for salaried and self-employed individuals?
Same slabs. Salaried get Rs. 75,000 standard deduction, zero-tax ceiling at Rs. 12.75 lakh. Self-employed do not.
Can I switch back to the old tax regime after choosing the new one?
Salaried can switch every year at ITR filing. Business income taxpayers get one switch back, then stay.
Is the new tax regime beneficial for all taxpayers?
Not for everyone. Heavy home loan borrowers, full HRA claimants, and large 80C portfolios may still favour the old regime. Break-even around Rs. 5-6 lakh in total deductions.
How can online platforms assist with tax filing under the new regime?
Regime comparison side by side, updated slab data after each Budget, TDS reconciliation, guided ITR filing. Fewer wrong choices and fewer missed deductions.
What is the impact of the new tax regime on taxpayers in different income groups?
Under Rs. 12 lakh: Zero tax. Rs. 12-20 lakh: run both. Above Rs. 24 lakh with substantial deductions: old regime may still win. Budget 2025-26 tipped the balance toward the new regime for most middle-income earners, not all.
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